[Crypto Zoom-In by Kang Ryun-ho] Blockchain and Personal Data Protection: Design is More Important than Technology

On-chain information should be minimized, and personal data needs to be managed separately.

It is also important to establish technical and managerial measures for personal data processing.

Privacy-centric design determines the sustainability of blockchain.

Recently, blockchain has garnered attention as an innovative technology that can ensure data integrity and reliability based on distributed ledger technology. Its application scope is rapidly expanding across various fields such as finance, public administration, logistics, and healthcare, and it is recognized for its high potential in preventing data tampering and enabling trust-based transactions.

However, alongside these technological advantages, new risk factors have emerged regarding personal data protection, necessitating systematic review and response.

Below, based on the personal data protection guidelines for blockchain services presented by the Personal Information Protection Commission, we will examine the key concepts and characteristics of blockchain, particularly focusing on the risk factors arising from the combined structure of on-chain and off-chain information, and propose management measures accordingly.

Blockchain is a technology that generates data in blocks and connects them in a chain form, distributing storage across multiple network participants (nodes). Each node participates in the creation, verification, and storage of data, ensuring data integrity and reliability by sharing the same ledger.

In this process, blockchain data is broadly categorized into on-chain information and off-chain information. On-chain information is data recorded on the blockchain network, which, due to its technical characteristics, is virtually impossible to modify or delete. In contrast, off-chain information is stored in external databases or servers and is utilized in conjunction with hash values or wallet addresses on-chain.

The issue arises when these on-chain and off-chain information are combined, as it can lead to the identification of specific individuals. In this case, the entity processing the information becomes a personal data processor under the Personal Information Protection Act, bearing legal obligations. Particularly in a blockchain environment, where there are many participants and the structure is decentralized, the attribution of personal data processing responsibilities can become unclear, necessitating a different approach compared to traditional centralized systems.

Blockchain generally possesses three core characteristics: transparency, decentralization, and immutability. However, these characteristics can act as risk factors in terms of personal data protection.

First, in terms of transparency, on-chain information recorded on the blockchain is made public to network participants, especially in the case of public blockchains, where anyone can view and analyze the data. This creates the possibility of tracking specific individuals through transaction pattern analysis, leading to privacy infringement risks.

Second, regarding decentralization, blockchain lacks a central administrator and has a structure where multiple participants jointly manage data. While this enhances the stability and reliability of the system, it simultaneously makes it difficult to identify responsible parties related to personal data processing. Additionally, as new participants increase, the risk of personal identification may rise due to expanded data access.

Third, concerning immutability, data recorded on the blockchain is virtually impossible to modify or delete. This is a key element in preventing data tampering but complicates the fulfillment of rights to correction, deletion, and obligations for destruction required under personal data protection laws. Particularly, if incorrect personal data is recorded or deletion requests arise, it becomes technically challenging to address these issues.

Considering these risk factors, it is essential to reflect personal data protection from the design phase of blockchain-based services. The main management measures proposed in the guidelines are as follows:

First, minimize on-chain information and ensure anonymization. Personally identifiable information such as names and resident registration numbers should not be recorded on-chain in principle. Instead, only encrypted information should be recorded, and actual personal data should be managed separately off-chain. This minimizes the risk of personal data exposure due to the transparency of blockchain.

Second, strengthen the protection of off-chain data. Off-chain data linked to on-chain information can lead to personal identification in the event of data leakage, so safety measures under personal data protection laws, such as encryption, access control, and access log management, must be thoroughly implemented.

Third, enhance cryptographic technology and random number management. When generating on-chain information, secure cryptographic algorithms should be applied, and random values used in electronic signatures should be managed to avoid reuse. This contributes to reducing the possibility of identifying the same user and lowering tracking risks.

Fourth, clarify personal data processing relationships among participants. The legal obligations applicable depend on whether the relationship among blockchain participants constitutes third-party provision of personal data or outsourcing. Therefore, the roles and responsibilities of each participant should be clearly defined through contracts, agreements, or operational policies.

Fifth, establish a response system for personal data destruction. Due to the immutability of blockchain, deleting on-chain data itself is difficult, so only anonymous information should be recorded on-chain, and personal data stored off-chain and additional information used for hash generation should be deleted to achieve practical personal data destruction.

Blockchain has established itself as a core infrastructure for implementing a trust-based digital economy, and its application scope is expected to expand further in the future. However, the advancement of technology must not lead to a decline in personal data protection levels. Particularly, the structural characteristics of blockchain are likely to conflict with existing personal data protection systems, necessitating concurrent legal and technical responses to complement this.

Ultimately, personal data protection in the blockchain environment must move beyond mere regulatory compliance towards implementing 'Privacy by Design.' It is crucial to internalize personal data minimization, anonymization, and access control from the service design phase and clarify the responsibility structure among participants. When these efforts are made in tandem, blockchain can evolve into a sustainable technology that achieves both reliability and personal data protection.

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